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Credit card debt can be more expensive than most other types of debt. The reason? Not only do credit cards tend to charge high interest rates, but credit card interest is often compounded daily, allowing it to quickly add up.
That’s why a credit card balance can be so harmful to your finances. But the good news is that all generations have managed to decrease their credit card debt since the end of 2023, according to New York Life’s latest Wealth Watch survey.
That said, one generation owes more credit card debt than others. And it may not be the one you’d expect.
Baby boomers are in the lead — but not in a good way
Baby boomers currently carry the most credit card debt of any generation, with an average balance of $7,808.93.
To be fair, Gen Xers aren’t too far behind. They owe an average of $7,530.31.
Millennials, on the other hand, are doing a bit better, with an average balance of just $5,370.06. And Gen Zers have a fairly low average balance of $1,707.52.
However, Gen Zers are also younger with fewer years of earnings under their belts. Their lower balances may be due to lower incomes and credit limits.
One tactic boomers can use to get out of credit card debt
Credit card debt is particularly dangerous for baby boomers because many people this age are already retired or almost retired. It’s hard enough to manage debt payments when you’re working and earning a paycheck. Once you’re no longer working, they can be even more difficult to keep up with. So it’s in boomers’ best interest to get rid of their credit card debt as quickly as possible.
One tactic that might work is tapping home equity. Americans aged 65 and over have a median $250,000 in home equity, according to the National Council on Aging. Consolidating your credit card debt into a home equity loan could make it much easier to repay.
The reason? You might get a much lower interest rate on a home equity loan than what your credit cards are charging you. And that interest rate will be fixed, so your monthly payments will be more predictable.
One trick everyone can use to shed credit card debt
No matter your age, and whether you own a home or not, a personal loan is another good option to explore for consolidating credit card debt. Like a home equity loan, a personal loan offers the benefit of fixed interest and steady monthly payments. You may have an easier time managing those because you’ll know what to expect.
Also, with a home equity loan, falling behind on your payments could eventually put you at risk of losing your home. There are negative consequences to falling behind on personal loan payments, but foreclosure generally isn’t one of them.
Carrying credit card debt is bad news at any age. It pays to do what you can to shed yours as soon as you can, and to make it less expensive while you’re in the process of paying it off.
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